Pound Rises after Current Account Deficit of UK Narrows

A survey was recently conducted by the CBI (Confederation of British Industry) in which it has painted a mixed picture of UK’s economy. While there has been a steady growth in the manufacturing sector, the retail sector is struggling a lot. Apart from that, Pound has weakened considerably due to delay in trade talks with European Union.

Hence, the market is keeping a close eye on the business development, GDP and current account deficit data. It clearly shows that the economy of the country is performing well as compared to the expectation of the analysts.

The primary income and secondary income deficit got narrowed by £1.80 billion and £1.0 billion respectively whereas the total trade deficit narrowed by £0.3 billion in the 3rd quarter. For the quarter ending September 2017, the deficit stands at 4.5% GDP, which is down from 5.1% seen earlier.

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The UK Office for National Statistics also mentioned GDP growth about 0.4 percent growth in the 3rd quarter which is same from the previous estimate. However, GDP was higher than 0.3% growth recorded in the past 2 quarters of 2017. The economists were also not hoping for any revision in the 2nd estimate.

The main reason for the GDP growth in the 3rd quarter was the good performance in the service sector. Also, manufacturing sector contributed to the overall growth of GDP. It is to be noted that household spending grew by 0.5 percent in the third quarter.

In terms of volume, the gross fixed capital formation (GFCF) was estimated to be £82.3 billion in Q3 2017 which is up by 0.3% from £82.1 billion in the earlier quarter. The revised business investment was estimated to be around £45.9 billion which is 0.5% increase from £45.6 billion in Q2. Analysts were hoping for just 0.2% growth in the business investment.

Paul Hollingsworth who is UK economist at Capital Economics made the following statement:

“The economy looks to have maintained this pace in Q4. This should mean that GDP growth for 2017 as a whole should come in at about 1.8%.”

The economic data clearly shows that Pound would remain in a strong position during the holiday period.

Steven Rudford

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